Blanchard Kahn conditions are not satisfied: indeterminacy 2018


#1

Dear all,

I wrote a code to simulate a standard RBC model with labour market search. The model is similar to Andolfatto (1996, AER). The main difference is that I do not add the leisure into the utility function and also I do not take into account the intensive margin.

The code has been attached. Can anyone please have a look and tell me what might go wrong with the code?
rbcsam1.mod (3.2 KB)

Many thanks,
B.Wang


#2

You need to correct the timing of your model. Usually, employment is a predetermined variable. So

  n(+1)=(1-sigma)*n+hbar/nbar*h;                              //5.the law of motion for employment

looks wrong. Search the forum for similar issues.


#3

Dear Johannes, thank you for taking time reading my codes. I changed the timing as you suggested but it didn’t work. I have tried different timings for other equations and have tried the non-linear model as well. They either didn’t work. This makes me wonder if I should change the model.


#4

There is one unique correct timing. It is more likely you still have a mistake in the timing than in the model itself.


#5

Dear Johannes, I just want to say thank you for your help. It is indeed a timing problem. Apart from the point you made, I also messed up the timing in the budget constraint. Now the code is ok and I can proceed. Thank you.